Good morning, ladies and gentlemen, and welcome to Veru Inc.'s Investors Conference Call. [Operator Instructions] Please note that this event is being recorded. The statements made on this conference call that are not historical in nature are forward-looking statements. Such forward-looking statements reflect the company's current assessment of the risks and uncertainties related to our businesses. Our actual results and future developments could differ materially from the results or developments in such forward-looking statements. Factors that may cause actual results or developments to differ materially include such things as the risks related to the development of the company's product portfolio, risks related to the ability of the company to obtain sufficient financing on acceptable terms when needed to fund development and company operations, risks related to competition, government contracting risks and other risks detailed in the company's press releases, shareholder communications and Securities and Exchange Commission filings. For additional information regarding such risks, the company urges you to review its 10-Q and 10-K SEC filings. I would now like to turn the conference over to Dr. Mitchell Steiner, Veru Inc.'s Chairman, CEO and President. Please go ahead.

Thank you, operator, and good morning. This is Dr. Mitchell Steiner, Chairman, President and CEO of Veru. And joining me are Michele Greco, Chief Financial Officer and Chief Administrative Officer; and Phil Greenberg, Executive Vice President, Legal. Thank you for joining our call. Veru is a urology and oncology biopharmaceutical company focusing on prostate cancer and prostate cancer supportive care medicines. Today, we will update you on the clinical development of our drug pipeline and the commercialization of our products as well as provide financial highlights for the second fiscal quarter 2019. Our strategy is to be the prostate cancer company. We're dedicated to the development and commercialization of products to address unmet medical needs for prostate cancer treatment and supportive care. The markets for prostate cancer treatment and prostate cancer supportive care are well established as multibillion-dollar markets. And given our core expertise and the number and type of drugs in our pipeline, we are uniquely positioned to understand, develop and commercialize medicines for these unmet medical needs of prostate cancer patients. Here is a brief update on the advancement of the prostate cancer drug pipeline. We are enrolling an open-label Phase Ib/II clinical trial for VERU-111, a novel, proprietary, first-in-class, oral-selective antitubulin agent in metastatic castration-resistant prostate cancer patients that have also become resistant to novel androgen blocking agents, enzalutamide or abiraterone but prior to IV chemotherapy also referred to as a prechemotherapy state. In other words, the open-label Phase II trial will target those patients whose prostate cancer has progressed but before they go on to IV taxane chemotherapy. This prechemotherapy space in men who have failed a novel androgen blocking agent is currently the fastest growing unmet medical need segment in advanced prostate cancer. In the Phase Ib study, we are determining the maximally tolerated dose,…

Thank you, Dr. Steiner. Let's start with our second quarter results for the 3 months ended March 31, 2019. FC2 unit sales totaled $9.8 million, up 137% over the prior year second quarter of $4.1 million. Net revenues were up 171% to $7 million from $2.6 million in the prior year second quarter. The company reported FC2 sales growth in both its prescription business and its public sector business. Net revenues from the U.S. prescription business was up 753% to $2.6 million from $300,000 in the prior year second quarter. Net revenues for the public sector business was up 88% to $4.2 million from $2.3 million in the prior year second quarter. Gross profit was up 285% to $4.6 million from $1.2 million in the prior year second quarter. Gross margin increased to 66% from 47% in the prior year second quarter. The increase in gross margin is driven primarily by the increase in the U.S. prescription business. These financial results do not reflect the new tender orders that will be coming from South Africa. We previously announced that we won 75% of the South Africa tender, representing up to 120 million units over 3 years for the total tender. This translates to approximately 30 million units per year for our company and potentially $10.4 million in revenue per year for a total of approximately $30 million over a 3-year period. We expect these new orders from South Africa to commence shipping during the third quarter of this fiscal year. Operating expenses for the quarter increased by $800,000 to $6.7 million compared to the prior year second quarter of $5.9 million. The increase is primarily driven by the increase in research and development cost of $800,000. During the quarter, we incurred $1.9 million of interest expense and change in fair…

Thank you, Michele. I'm happy that we've had another strong financial quarter, which has allowed us to significantly advance our clinical programs during the quarter without the need for new financing. In fact, we now have had 3 strong quarters showing revenue growth in the commercialization of our products. Furthermore, as we have completed at least one month into Q3 fiscal year 2019, the revenues continue to be strong for the fiscal year third quarter as well. It should be noted that we're expecting the first South African tender orders to occur in Q3 fiscal year 2019. I would like to repeat that because of higher revenues and gross profit, we have improved the operating loss of $4.7 million in Q2 fiscal year 2018 to $2.1 million in Q2 fiscal year 2019, and from $12.1 million fiscal year-to-date 2018 to $3.1 million fiscal year-to-date 2019. With the improving performance of the commercial products and strengthening of the balance sheet, we believe that we'll be able to substantially pay for the continued clinical development of our prostate cancer drug product candidates as well as to submit NDAs and if approved, commercially launch TADFIN, which provide even more revenue, adding to the already growing revenues from the female health division and from PREBOOST Roman Swipes. I will now provide financial guidance for the full year fiscal year 2019. We expect net revenues will grow to $29 million to $32 million for the first full year fiscal year 2019, which represents a 95% increase over the full year fiscal year 2018. And we expect gross margin will be approximately 66% in fiscal year 2019 compared to 55% in fiscal year 2018. We will not provide guidance on operating margin at this time, and do not expect to update the guidance for the full…

[Operator Instructions] The first question comes from Kumar Raja of Brookline Capital.

So with regard to VERU-111, what further can you share in terms of the doses that are being tested? And in patients whom you are seeing reductions in the PSA level, what are the expectation in terms of whether this would be sustainable? And based on the early indications, what are your thoughts on the -- you were expecting to dose 26 patients in the Phase II. Do you think this would be sufficient to provide indications for the Phase III trial design?

Okay. I got your first 2 questions. Give me that third one again. So of the 26 patients...

So you are planning to dose 26 patients, so based on the early data, do you guys think that needs to be increased or decreased? Or you think that would be sufficient to design the Phase III?

Yes, yes, yes. So I think -- so I'll answer the third question first and the answer is, we believe the 26 patients will be sufficient. First question had to do with pretty much where are we now currently in the clinical trial. Let me just work backwards. We believe -- I gave you approximately 6 different escalating treatment groups and so by summer, we'll have all 6 completed. And the way that works is that the patient is dosed for 7 days and 2 weeks off, and we make a safety assessment after the first cycle. So we don't wait for 3 cycles before we move to the next one. So that kind of gives you a feel for the -- ends up being about, and we're really filling this trial pretty quickly. I mean the interestingly, we're finding the clinical sites, fighting over for these -- fighting over those 3 spots to get their patients in there, which is kind of interesting. And again, it shows you this is an unmet medical need. So with that, as a background, the limiting factor is not patients. Limiting factor is just purely time that we have to treat the patient one week on, 2 weeks off and then make a determination. So if you look at it that way, and we're going to be done by the summer, we're pretty much in the middle of this trial, as we speak. As it relates to durability of the PSA response or PSA stabilizations, really hard to say much at this point. And so what I would say is give us a little bit more time, and I'll be able to answer that. And as I mentioned on the third question, we believe 26 patients will be more than enough to give us an understanding of the percent of patients that will have a PSA reduction, what is the actual PSA 50 reduction and then finally, what is the durability of response.

And the expectation is that we will have data presentation at ESMO?

When is ESMO?

It's end of September.

Yes. We could -- by end of September, we should be able to have Phase Ib data. And so yes, that would be a good thing to target. And also the other thing that we target is some of the fall meetings. So for example, the Society of Urologic Oncology, SUO, will also be sort of late fall as well. But truth of the matter is that's when scientific part we can start to show some data. But if we have data this summer that looks exciting, we'll find a way to get the information out.

Maybe I can sneak a question on zuclomiphene. So obviously, you guys are expecting a 22% placebo effect. How much variability is there in the placebo effect? Is this 22% the higher level or -- and how should we include it?

Yes. Since we don't know who's treated and who's a placebo, I can tell you from the literature that there's several studies, and one, quite frankly, that we were involved with a selective estrogen receptor module in the former company and then there's the gabapentin study that was done by Loprinzi and there was another study that was done with Matthew Smith and basically 22% seems to be that magic number for the placebo effect. The reason that's important is because women, the placebo effect for hot flashes is close to the 40% to 50% and for men, it's closer to 20%. 20% seems to be the magic number.

The next question comes from Leland Gershell of Oppenheimer.

Congratulations on all the progress commercially and developmentally. Just have one question. Most my questions were asked and answered. Just do you have any update on the status of the patent application for TADFIN?

As you know, patent applications take a while to get decisions made, so we filed the patent application several months ago. And we feel pretty good based on the fact it's a new formulation. We had unintended positive effects that could translate to a safety benefit that we think the chances are pretty good we're going to get that patent. And -- but it's really kind of early to say in terms of decisions. I mean I will tell you the zuclomiphene patent, which is issued in the U.S. that was -- having been involved with over 400 or 500 patents, and I'm not exaggerating, that one we got like in 18 months or something like that and that's issued. That's unheard of. Usually it's years. So with that said, the expiry date is based on your 20 years from filing, and so that's why we said, we believe that, that patent, if issued, the expiry date will be 2040.

The next question comes from Yi Chen of H.C. Wainwright.

My first question is when you start recognizing the sales from orders from South Africa, is it only limited to the third quarter or you will have recurring revenue in the fourth quarter as well?

No. This is -- all we're trying to say is that we had originally guided that this year that we were expecting for the full year that South Africa would be ordering. The truth of the matter is we spent 6 months packaging, they wanted some new packaging and all the other stuff. So we took care of all of that. So the good news is, we haven't lost any orders. They're going to continue -- they're going to happen and continue. So the way I look at it is, starting in Q3 fiscal year 2019, we'll start getting the first orders and then that's like a 3-year annuity at that point. So we're expecting to see money coming in for the next 3 years. So no, this is definitely recurring.

Got it. Second question, I noticed that in the second quarter, the operating expenses is -- was higher than the first quarter. How should we expect the operating expenses to trend during the rest of fiscal 2019?

So as I mentioned in my comments that we're not going to try to guide on operating margin just because you're hitting a key point. We're using our money for what? To invest in clinical trials. And the clinical trials, the way that works is, you put money aside to pay for the clinical trial, sometimes those events happen, sometimes those events get delayed and so it's not an exact science. And so the operating margin will fluctuate based on what bills come in and what bills don't come in. What we can say for the overall year that we're going to be fine. That we're not going to need to, as I mentioned, in my comments, new equity financing to cover all of the expenses for drug development at least until 2021. The reason we don't go beyond that is because we've got to get that the point and then wherever we guide but with revenue coming in, it's allowing us to invest in these programs.

Okay. Will the 10-Q be filed today?

Yes.

The next question comes from Peter McMullin of Tiger Management.

My question would be more commercially. As things progress, you must be attracting some attention and have there been inquiries as somebody that might like to codevelop or put some money in? And therefore, delay the need for equity. How do you feel about the options there for the future?

Yes. So let's break it up into 2 pieces. The first piece is the commercial side and the other piece is the drug development side. On the drug development side, particularly TADFIN because we're filing the NDA, we have had a very, very active partnership discussions, particularly Europe and South America. And we are -- I mentioned in my comments that we believe we could be able to secure partnerships that will provide upfront and royalties for TADFIN, which is the closest one in the drug development pipeline. So that's exciting, okay? As it relates to zuclomiphene and VERU-111, zuclomiphene, as you know, is the hot flash product. We are also in discussions with potential European partners, which could provide upfront money and offload some expense in the Phase III and ultimately, we'll have a royalty stream and milestones. And so those kinds of discussions are going on. So I do expect, as we get clinical data this summer, there will be a lot of activity there. As it relates to VERU-111 interestingly, as you know, that's the big one and the large pharmaceutical companies that you would expect want to reach out to us and talk to us about it, particularly those that have the big drugs that we're solving the problem when patients develop resistance. Yes, we're talking to them too and hopefully that -- eventually that will bear fruit in the long run. As it relates to the commercial products, which is FC2 and PREBOOST, well, PREBOOST, Get Roman, which is a premier men's health telemedicine group signed an exclusive agreement with us. It's a 3-year multi-contract so that really beared fruit. And I mean at one point, I think we sold like $11,000 worth of PREBOOST over a year using traditional marketing and sales. And with…

Congratulations on great progress.

Thank you.

And we have a follow up from Kumar Raja from Brookline Capital.

Mitch, I just wanted to get update with regard to the Tamsulosin extended release. What's happening with regards to the bioequivalence studies there?

Great, great question. As you can see from our presentations this morning, the call -- we've got a lot going on. The goal in the -- for our company is to be the prostate cancer company. So the first focus is to make sure we move our prostate cancer products, which we have been very good in this short period of time getting them into meaningful clinical trials, the clinical data coming out this year. So that was goal #1. Number two is to be able to provide resources to pay for the prostate cancer programs through 2 mechanisms -- 2 sources of revenue. One was the female health division, which is, you can see now is bearing fruit, particularly because of the U.S. prescription business and because of the outstanding work done by Denise van Dijk, who is the President of the Public sector side and she's done a wonderful job getting South Africa and other countries, including UNFPA to step up. So those resources have helped us invest, okay? On the urology specialty pharmaceutical side, a couple of positive developments happened, one was PREBOOST. All of a sudden now we're signing multiyear contract with a telemedicine company that can provide revenue to come in from that product. And the second product is TADFIN, which hit bioequivalence, it hit bioavailability and we are filing the MDA later this year, beginning of next year with a approval and launch expected in 2020. So tamsulosin is -- we're still working on it. But in terms of all the stuff that's going on, our bandwidth is such that we're going to keep moving that along as another -- it's an asset, it's one of our assets. Solifenacin is another one of our assets. We're very, very fortunate that we have all of these assets, and I'll only make one last comment and that is we are very, very interested in -- from a business development standpoint and also from a standpoint of becoming the prostate cancer company, we really, really, really are focusing on additional products, whether we develop them internally, or whether we bring them in externally to grow our prostate cancer portfolio. So the real value of our company, ultimately, ultimately, ultimately be around how successful we are transforming this company into a prostate cancer company.

The next question is a follow up from Leland Gershell of Oppenheimer.

Mitch, I do have one follow up. Even as you define yourselves as a prostate cancer company and with 111 clearly showing continued indication of robustness for that type of malignancy, given the mechanism of the drug, want to ask about other sensors that may be away from a uro-oncology that you may be considering for testing.

Yes, great question. As you know, the other thing is, in addition to being a prostate cancer company, we have to be incredibly opportunistic when we have a potential for a multibillion-dollar product. And so yes, the beauty of VERU-111 is that in prostate cancer, the 2 drugs that have ever really, really shown promise, put immunotherapy aside, is going to be hormone therapy, such as androgen deprivation therapy so castration and second is the antitubulins, which IV taxanes is an example. So that's why we went into prostate cancer. But it turns out there are so many cancer types that are sensitive to antitubulins that if we had an oral agent, particularly an oral agent that works in taxane-resistant tumors that we have a real opportunity to expand beyond prostate into other cancer types. And so you're absolutely right. So we do have evidence and we have presented at ASCO, not this year but last year, evidence in ovarian cancer, pancreatic cancer, triple negative breast cancer. We have published on melanoma, lung cancer, so you're absolutely right, we would be -- it would not -- it would be in the best interest of the company that if we enter into the summer with PSA responses, durable responses, safety where there is no neutropenia and that continues the hold true and no neurotoxicity, which are the major side effects of taxanes, then we -- it would make sense for us to expand into a series of small Phase II studies to begin to show the true value of VERU-111, particularly for a partner. So if we do end up partnering the opportunity, then you can see how we could partner the opportunity where we can focus, at least in the clinical development or stay in our wheelhouse, which is understanding prostate cancer. But we could use a large pharmaceutical company that can take on the development of the rest of the portfolio and other tumor types.

[Operator Instructions] Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Dr. Mitchell Steiner for any closing remarks.

Thank you, operator. I really appreciate you joining us on today's call. I look forward to updating all of you on our progress in our next investors call. Thank you.

The digital replay of the conference will be available, beginning approximately noon Eastern Time today, May 15, by dialing 1(877) 344-7529 in the U.S. and 1(412) 317-0088 internationally. You'll be prompted to enter the replay access code, which will be 10130716. Please record your name and company when joining. The conference has now concluded. Thank you for attending today's discussion. You may now disconnect.